UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549 Form 10-QSB (Mark One) xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period endedJune 30, 2007 [
        ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to __________ Commission file number000-29981 BIOPACK ENVIRONMENTAL SOLUTIONS INC.(Exact name of small business issuer as specified in its charter)  Nevada
        
        91-2027724(State or other jurisdiction of incorporation or organization)
        
        (IRS Employer Identification No.)  18/F Metroplaza Tower II, 223 Hing Fong Road, Kwai Chung, New Territories, Hong Kong(Address of principal executive offices)  852.3586.1383(Issuers telephone number)  (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx
        No [
        ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  (Check one):     Yes [   ]     Nox APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 173,819,159 common shares issued and outstanding as of Aug 14, 2007 Transitional Small Business Disclosure Format (Check one):
        Yes [
        ]
        Nox       CW1360087.4   PART I  -  FINANCIAL INFORMATION Item1.Financial Statements.  Biopack Environmental Solutions, Inc. and Subsidiaries Consolidated Balance Sheets  (Unaudited)June 30,
        
        December 31,2007
        
        2006AssetsCurrent assetsCash and equivalents
        
        
        
        
        $
        61,626
        $
        801,795Accounts receivable
        
        
        
        
        
        540,577
        
        --Prepaid expenses and other assets
        
        
        
        
        
        1,672,633
        
        24,580Total current assets
        
        
        
        
        
        2,274,836
        
        826,375Property plant and equipment, net
        
        
        
        
        
        219,286
        
        220,931Deposits
        
        
        
        
        
        158,666
        
        128,583Advances to related parties
        
        
        
        
        
        2,254,865
        
        2,256,099Total assets
        
        
        
        
        
        4,907,653
        
        3,431,988Liabilities and stockholders' equityCurrent liabilitiesAccounts payable and accrued expenses
        
        
        
        2,334,937
        
        1,354,716Accrued income taxes
        
        
        
        
        
        267,801
        
        244,587Vehicle obligation payable
        
        
        
        
        
        25,604
        
        27,567Deferred taxes
        
        
        
        
        
        1,879
        
        1,889Due to related parties
        
        
        
        
        
        1,186,002
        
        1,362,484Total current liabilities
        
        
        
        
        
        3,816,223
        
        2,991,243Stockholders' equityPreferred stock, 10,000,000 shares authorized at $.001,par value, -0- and 1,000,000 shares issued and outstandingat June 30, 2007 and 2006
        
        
        
        
        
        --
        
        1,000Common stock, 500,000,000 shares authorized,$.0001 par value; 173,821,155 and 67,827,859issued and outstanding at June 30, 2007 and 2006
        
        
        
        17,382
        
        6,782Additional paid-in capital
        
        
        
        
        
        232,903
        
        (690,378)Stock issued at less than par value
        
        
        
        
        
        (2,683)
        
        (2,683)Retained earnings
        
        
        
        
        
        742,028
        
        1,119,425Accumulated other comprehensive income
        
        
        
        101,800
        
        6,599Total stockholders' equity
        
        
        
        
        
        1,091,430
        
        440,745Total liabilities and stockholders' equity
        
        
        $
        4,907,653
        $
        3,431,988  See accompanying notes to consolidated financial statements  CW1360087.4       Biopack Environmental Solutions, Inc. and Subsidiaries Consolidated Statement of Operations For the Three and Six Months Ended June 30, 2007 and 2006 (Unaudited)   Three months ended
        
        Six months endedJune 30,
        
        June 30,2007
        
        2006
        
        2007
        
        2006Revenues, net
        $
        794,623
        $
        1,655,590
        $
        1,593,122
        $
        3,311,181Cost of revenues
        
        454,115
        
        1,312,026
        
        975,876
        
        2,624,052Gross profit
        
        340,508
        
        343,564
        
        617,246
        
        687,129ExpensesGeneral and administrative
        
        468,735
        
        178,103
        
        917,170
        
        369,193Total operating expenses
        
        468,735
        
        178,103
        
        917,170
        
        369,193Income (loss) from operations
        
        (128,227)
        
        165,461
        
        (299,924)
        
        317,936Interest income
        
        62
        
        2,090
        
        1,000
        
        4,179Interest expense
        
        (53,240)
        
        (454)
        
        (53,968)
        
        (908)Income (loss) before income tax
        
        (181,405)
        
        167,097
        
        (352,892)
        
        321,207Income tax
        
        (3,251)
        
        34,025
        
        24,507
        
        68,050Net income (loss)
        $
        (178,154)
        $
        133,072
        $
        (377,399)
        $
        253,157Earnings (loss) per share
        $
        (0.00)
        $
        0.00
        $
        (0.00)
        $
        0.01Weighted average commonshares outstanding
        
        159,121,084
        
        39,941,193
        
        103,496,800
        
        19,999,557   See accompanying notes to consolidated financial statements  CW1360087.4       Biopack Environmental Solutions, Inc. and Subsidiaries Consolidated Changes of Changes in Cash For the Six Months Ended June 30, 2007 and 2006 (Unaudited)  2007
        
        2006Cash flows from operating activitiesNet income (loss)
        
        
        $
        (377,399)
        $
        253,157Adjustments to reconcile net loss to net cash used inoperating activitiesDepreciation and amortization
        
        
        
        9,151
        
        474Deferred income taxes
        
        
        
        (10)
        
        237Other comprehensive income (loss)
        
        
        
        95,201
        
        --Changes in assets and liabilities:Accounts receivable
        
        
        
        (540,577)
        
        50,406Prepaid expenses and other assets
        
        
        
        (1,648,053)
        
        (3,934)Accounts payable and accruals
        
        
        
        980,223
        
        118,423Accrued income taxes
        
        
        
        23,214
        
        16,715Net cash (used in) provided by operatingactivities
        
        
        
        (1,458,250)
        
        435,478Cash flows from investing activitiesPurchase of property and equipment
        
        
        
        (7,506)
        
        (8,049)Increase in deposits
        
        
        
        (30,083)
        
        (1,462)Net cash used in investing activities
        
        
        
        (37,589)
        
        (9,511)Cash flow from financing activitiesRepayment of vehicle lease obligation
        
        
        
        (1,963)
        
        --Repayment of notes payable
        
        
        
        --
        
        (61,574)Increase in due to related parties, net
        
        
        
        756,399
        
        --Repayment of advances to related parties
        
        
        1,234
        
        --Advances to related parties
        
        
        
        --
        
        (88,379)Proceeds from issuance of common stock
        
        
        --
        
        110,000Net cash provided by (used in)financing activities
        
        755,670
        
        (39,952)Net change in cash
        
        
        
        (740,169)
        
        386,015Cash, beginning of year
        
        
        
        801,795
        
        63,824Cash, end of period
        
        
        $
        61,626
        $
        449,839Supplemental disclosure of cash flow information:Cash paid for income taxes
        
        
        $
        --
        $
        --Cash paid for interest
        
        
        
        53,968
        
        9,872Non-cash investing and financing activities:Stock issued to retire debt to related parties
        $
        1,034,580
        $
        --Preferred shares transferred to treasury
        
        
        
        1,000
        
        --  See accompanying notes to consolidated financial statements   CW1360087.4
        2       The accompanying condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations.  These condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented.  It is suggested that these condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Companys Annual Report on Form 10-K.  The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. 1. The Company Biopack Environmental Solutions Inc. (formerly known as Star Metro Corp.) and its Subsidiaries are principally engaged in the provision of total packaging solutions in global green packaging industry, delivering services ranging from product design and development, product testing, quality assurance, sales and distribution to customer services.  The Company markets 100% biodegradable food containers and industrial packaging products in Europe, North America and Asia. The Company was incorporated on August 28, 2000 in the state of Nevada under the name Quadric Acquisitions.  On April 25, 2001, the Company was acquired by Zkid Network Company and changed its name to ZKid Network Co. On May 8, 2006, the Company closed a share exchange agreement with Star Metro Group Limited, which became its wholly-owned subsidiary.  Under the terms of the share exchange agreement the Company exchanged 60,000,000 shares of its common stock for 100% of the issued and outstanding shares of Star Metro Group at a ratio of 1 share of its common stock for each 2,000 shares of Star Metro Group Limiteds stock.  As a result of the share exchange agreement, the Company became engaged in the development of a line of biodegradable, single use, food and beverage containers. On March 20, 2006, the Company changed its name from ZKid Network Co. to Eatware Corporation. On November 27, 2006, the Company changed its name from Eatware Corporation to Star Metro Corp..  The Company effected this name change by merging Star Metro Corp., the Companys newly incorporated and wholly-owned subsidiary that was created for this purpose, into the Company, with the Company carrying on as the surviving corporation under the name Star Metro Corp. On February 26, 2007, the Company changed its name from Star Metro Corp. to Biopack Environmental Solutions Inc. This name change was effected by merging Biopack Environmental Solutions Inc., the Companys newly incorporated and wholly-owned subsidiary that was created for this purpose, into the Company, with the Company carrying on as the surviving corporation under the name Biopack Environmental Solutions Inc. On March 27, 2007, the Company completed a share exchange with the shareholders of Roots Biopack Group Limited, a company formed under the laws of the British Virgin Islands.  Under the terms of the share exchange agreement the Company acquired all of the issued and outstanding common shares of Roots Biopack Group in exchange for the issuance of 90,000,000 common shares to the former shareholders of Roots Biopack Group.  As of the closing date of the share exchange agreement, the former shareholders of Roots Biopack Group held approximately 62.13% of the issued and outstanding common shares of the Company. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (US GAAP). The consolidated financial statements include the accounts of Biopack Environmental Solutions Inc. and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated from the consolidated financial statements.   CW1360087.4
        3       Use of Estimates In preparing consolidated financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Significant estimates include the valuation of accounts receivable, the estimation of useful lives of property, plant and equipment, and deferred income taxes.  Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Accounts Receivable Accounts receivable are stated at original amounts less an allowance made for doubtful receivables, if any, based on a review of all outstanding amounts at the end of the period.  Full allowances for doubtful receivables are made when the receivables are overdue for one year and an allowance is made when there is objective evidence that the Company will not be able to collect all amounts due according to original terms of receivables.  Bad debts are written against the allowance when identified.  The Company extends credit to customers on an unsecured basis in the normal course of business and believes that all accounts receivable in excess of the allowance for doubtful accounts are to be fully collectible.  The Company does not accrue interest on trade accounts receivable.  The normal credit terms range from 15 to 60 days.  The Company did not record an allowance for doubtful accounts at June 30, 2007 due to
no bad debt experience during the period. Property, Plant and Equipment Property, plant and equipment is stated at cost. Depreciation is provided principally by use of the straight-line method over the useful lives of the related assets, except for leasehold properties, which are depreciated over the terms of their related leases or their estimated useful lives, whichever is less. Expenditures for maintenance and repairs, which do not improve or extend the expected useful life of the assets, are expensed to operations while major repairs are capitalized. The estimated useful lives are as follows: YearsLeasehold improvements
        5Furniture and fixtures
        5Vehicles
        5Computer equipment
        5  The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets, and, if any, is recognized in the statement of operations. Impairment of Assets In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets", the Company evaluates its long-lived assets to determine whether later events and circumstances warrant revised estimates of useful lives or a reduction in carrying value due to impairment. If indicators of impairment exist and if the value of the assets is impaired, an impairment loss would be recognized. As of March 31, 2007, no impairment loss has been recognized. Income Taxes The Company accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect  CW1360087.4
        4      on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Foreign Currency Transactions The Companys functional currency is Hong Kong Dollars (HKD) and Malaysia Ringatt (MYR)and its reporting currency is U.S. dollars. The Companys consolidated balance sheet accounts are translated into U.S. dollars at the period end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the periods in which these items arise. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred. Fair Value of Financial Instruments SFAS No. 107, Disclosures about Fair Values of Financial Instruments, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement. For certain financial instruments, including cash, accounts and other receivables, accounts payable, accruals and other payables, it was assumed that the carrying amounts approximate fair value because of the near term maturities of such obligations. The carrying amounts of long-term loans approximate fair value as the interest on these loans is minimal. It is managements opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments. The Company is exposed to certain foreign currency risk from export sales and import purchase transactions and recognized accounts receivable and payable as they will affect the future operating results of the Company.  The Company did not have any hedging activities during the reporting period. Earnings Per Share Basic earnings per share is computed by dividing the earnings for the year by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including stock options and warrants, in the weighted average number of common shares outstanding for a period, if dilutive. Accumulated Other Comprehensive Income The Company has adopted SFAS 130, Reporting Comprehensive Income, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances.  Accumulated other comprehensive income represents the change in equity of the Company during the periods presented from foreign currency translation adjustments. Stock-Based Compensation In March 2004, the FASB issued a proposed statement, Share-Based Payment, which addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for equity instruments of the enterprise or liabilities that are based on the grant-date fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. The proposed statement would eliminate the ability to account for share-based compensation transactions using Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and generally would require instead that such transactions be accounted for using a fair-value-based method. In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which is a revision of SFAS No. 123. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No.
123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their grant-date fair values. Pro forma disclosure is no longer an alternative.   CW1360087.4
        5       As permitted by SFAS No. 123, for 2005, the Company accounted for share-based payments to employees using APB Opinion No. 25's intrinsic value method and, as such, generally recognized no compensation cost for employee stock options. Effective January 1, 2006, the Company have adopted SFAS No. 123(R)'s fair value method of accounting for share based payments. Accordingly, the adoption of SFAS No. 123(R)'s fair value method may have a significant impact on the Company's results of operations as are required to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. SFAS No. 123(R) permits public companies to adopt its requirements using either the "modified prospective" method or the "modified retrospective" method. The Company adopted SFAS No. 123(R) using the modified prospective method. In April 2005, the SEC delayed the effective date of SFAS No. 123(R), which is now effective for public companies for annual, rather than interim periods that begin after June 15, 2005. The impact of the adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. Revenue Recognition Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors such as when there has been evidence of a sales arrangement, the performance has occurred, or service have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Concentration of Credit Risk Concentration of credit risk is limited to accounts receivable and is subject to the financial conditions of major customers.  The Company does not require collateral or other security to support accounts receivable.  The Company conducts periodic reviews of its clients financial condition and customers payment practices to minimize collection risk on accounts receivable. New Accounting Pronouncements In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." The objective of this Issue is to provide guidance for identifying impaired investments. EITF 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the FASB issued a FASB Staff Position (FSP) EITF 03-1-1 that delays the effective date of the measurement and recognition guidance in EITF 03-1 until after further deliberations by the FASB. The disclosure requirements are effective only for annual periods ending after June 15, 2004. The Company has evaluated the impact of the adoption of the disclosure requirements of EITF 03-1 and does not believe it will have an impact to the Company's overall combined results of operations or combined
financial position. Once the FASB reaches a final decision on the measurement and recognition provisions, the Company will evaluate the impact of the adoption of EITF 03-1. In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4, (" SFAS No. 151"). The amendments made by SFAS 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The Company has evaluated the impact of the adoption of SFAS 151, and does not believe the impact will be significant to the Company's overall results of operations or financial position. In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate Time-Sharing Transactions-an amendment of FASB Statements No. 66 and 67" ("SFAS 152") SFAS 152 amends SFAS No. 66, "Accounting for Sales of Real Estate", to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing Transactions". SFAS 152 also amends SFAS No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects", to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is  CW1360087.4
        6      subject to the guidance in SOP 04-2. SFAS 152 is effective for financial statements for fiscal years beginning after June 15, 2005, with earlier application encouraged. The Company has evaluated the impact of the adoption of SFAS 152, and does not believe the impact will be significant if any, to the Company's overall results of operations or financial position since the Company does not enter into such transactions. In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions." The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive
assets. That exception required that some nonmonetary exchanges, although commercially substantive, to be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the FASB believes SFAS No.153 produces financial reporting that more faithfully represents the economics of the transactions. SFAS No.153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The provisions of SFAS No.153 shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 153, and does not believe the impact will be significant to the Company's overall results of operations or financial position. In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) replaces SFAS No. 123, "Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting
for share-based payment transactions with employees. However, that statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply SFAS 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. This pronouncement is effective for the Company, a small business issuer, as of the first interior annual reporting period that begins after December 15, 2005. The Company has evaluated the impact of the adoption of SFAS 123(R), and does not believe the impact will be significant to the Company's overall results of operations or financial position. In May, 2005, The FASB issued SFAS No. 154, entitled Accounting Changes and Error Corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3. This Statement replaces APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application
to prior periods financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This Statement defines as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity. This statement also redefines restatement as the revising of previously issued financial statements to reflect the correction of an error. The adoption of SFAS 154 did not impact the financial statements. In February, 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Statements. SFAS No. 155 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155, permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to  CW1360087.4
        7      the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial statements that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Companys first fiscal year that begins after September 15, 2006. Management believes that this statement will not have a significant impact on the financial statements. In March, 2006 FASB issued SFAS 156 Accounting For Servicing of Financial Assets this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement: Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. Permits an entity to choose Amortization method or Fair value measurement method for each class of separately recognized servicing assets and servicing liabilities. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entitys exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value. Requires separate presentation of servicing assets and liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. Management believes that this statement will not have a significant impact on the financial statements. In September 2006, FASB issued SFAS 157 Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the effect of this pronouncement on financial statements. In September 2006, FASB issued SFAS 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An
employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements. The requirement to measure plan assets and benefit obligations as of the date of the employers fiscal year-end statement  CW1360087.4
        8      of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements. In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities and is effective for fiscal years beginning after November 15, 2007.  This Statement permits entities to choose to measure many financial instruments and certain other items at fair value.  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  The Company is currently assessing the impact the adoption of this pronouncement will have on the financial statements.  3. Property, Plant and Equipment, net CostLeasehold improvements
        $
        5,420Motor vehicle
        
        44,528Office furniture and equipment
        
        34,971Computer equipment
        
        9,733Construction in progress
        
        152,251246,903Accumulated depreciation
        
        (27,617
        )$
        219,286 Depreciation expense for the six months ended June 30, 2007 was $9,151. Construction in progress: The Company intends to build and operate a production plant in Malaysia. As of December 31, 2006, the Company had spent $152,251 on the construction. These costs are included on the balance sheet in the property, plant and equipment costs. No depreciation will be provided until the plant is completed and operating. 4.  Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. These consolidated financial statements show that the Company has a working capital deficit of $1,541,387. The future of the Company is dependent upon its continuing successful operations, or raising the capital it will require through the issuance of equity securities, borrowings or a combination thereof. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded assets, or the amounts or classifications of liabilities that might be necessary in the event the Company cannot continue in existence. 5. Commitments and Contingencies The Company leases its office spaces under operating lease agreements.  The Company leases its Hong Kong office space pursuant to a lease which has a term of three years beginning June 2, 2006 and ending June 4, 2009, with monthly payments of $8,572 per month.  The Company leases its Malaysia office pursuant to a lease for a period of one year beginning December 15, 2006 and ending December 14, 2007, with monthly payments of $1,243 per month.  Roots Biopack Limited, leases an office at Unit 2009, Hopewell Centre, 183 Queens Road East, Wan Chai, Hong Kong, for a monthly rent of $4,295.  This lease will expire November 14, 2008.  Our PRC subsidiary, Jiangmen Roots Biopack Limited, leases 4 vacant properties at No.3, Yangjiaokeng Industrial District, Tingyuan Village, Duruan Town, Jiangmen City, PRC for the period from March 1, 2007 to Feb 29, 2022, at an initial amount of $12,993. The Company leases office equipment and office renovations.  The lease is for a period of three years beginning June 5, 2006 and ending June 4, 2009 with monthly payments of $2,731 per month.   CW1360087.4
        9       The Company entered into a corporate management services agreement for the period September 1, 2006 to May 31, 2009 and have agreed to pay a management fee of $12,438 per month.  have an agreement to pay for corporate management services for the period beginning September 1, 2006 and ending May 31, 2009. The management fee is in the amount of $12,438 per month. The following table shows a projection of future minimum payments under operating leases and corporate management service agreements as of December 31, 2006: 2007
        $
        447,4982008
        
        452,1262009
        
        278,636$
        1, 178,260 6.  Income taxes The provision for income taxes at March 31, 2007 is as follows: Hong Kong profits tax
        $24,507 7.  Acquisition On March 27, 2007, the Company completed a share exchange with the shareholders of Roots Biopack Group Limited, a company formed under the laws of the British Virgin Islands.  Under the terms of the share exchange agreement the Company acquired all of the issued and outstanding common shares of Roots Biopack Group in exchange for the issuance by the Company of 90,000,000 common shares to the former shareholders of Roots Biopack Group.  As of the closing date of the share exchange agreement, the former shareholders of Roots Biopack Group held approximately 62.13% of the issued and outstanding common shares of the Company. Prior to our acquisition of the common shares of Roots Biopack Group, the Company had one wholly owned subsidiary, Starmetro Group Limited, which is incorporated in the British Virgin Islands.  Starmetro Group Limited, in its turn, had two wholly owned subsidiaries: E-ware Corporation Limited, a Hong Kong corporation, and Bioplanet Distribution Sdn Bhd, a Malaysian corporation. Since the completion of the Companys share exchange with the former shareholders of Roots Biopack Group Limited, we have begun the process of integrating our existing business, being the development of a line of biodegradable, single use, food and beverage containers, with the Roots Biopack Group business, which consists of the development, manufacture, distribution and sale of biodegradable food container and industrial packaging products made from natural materials.  Because we are the successor business to Roots Biopack Group and because the operations and assets of Roots Biopack Group represents our entire business and operations from the date of completion of the share exchange, our management's discussion and analysis is based on Roots Biopack Group financial results for the relevant periods. For accounting purposes, Roots Biopack Group Limited is considered the acquirer in our transaction and is therefore treated as our predecessor entity as of March 27, 2007.  Therefore, beginning with this quarterly report on Form 10-QSB, which is our periodic report for the quarter in which the acquisition was consummated, we will file annual and quarterly reports based on the December 31 fiscal year-end of Roots Biopack Group Limited.  The financial statements included in these periodic reports will depict the operating results of Roots Biopack Group Limited, including the acquisition of our company, from March 27, 2007. 8.  Vehicle Obligation Payable The Company has an agreement to lease a motor vehicle under a direct financing lease. The payment for this direct financing lease is $373 per month. This obligation is included in the balance sheet under current liabilities. 9.  Pension Plans  The Company participates in a defined contribution pension plan under the Mandatory Provident Fund Schemes Ordinance MPF Scheme for all its eligible employees in Hong Kong.   CW1360087.4
        10       The MPF Scheme is available to all employees aged 18 to 64 with at least 60 days of service in the employment in Hong Kong.  Contributions are made by the Groups subsidiary operating in Hong Kong at 5% of the participants relevant income with a ceiling of HK$20,000.  The participants are entitled to 100% of the Companys contributions together with accrued returns irrespective of their length of service with the Company, but the benefits are required by law to be preserved until the retirement age of 65.  The only obligation of the Company with respect to the MPF is to make the required contributions under the Plan.  The assets of the Plan are controlled by the trustees and held separately from those of the Company.  Total pension cost for the three months ended March 31, 2007 was $3,558.  10.  Advance to Related Parties  The Company has advanced $2,145,480 to a related company as of June 30, 2007.  The advances are unsecured, interest free, and have no fixed terms of repayment.  Pursuant to a letter of intent entered into with the related company on January 8, 2007, the Company intends to purchase property, plant and equipment from the related company in consideration of approximately $1,800,000.  The Company intends to offset this consideration with the advance.  11.  Subsequent Event  On August 17, 2007 the Company repaid the principal and accrued interest on  a promissory note in the amount of $ 1,133,668 through the issuance of 1,000,000 shares of Series A preferred stock and 1,000,000 shares of  newly authorized Series B preferred stock.  Each of these preferred shares have thirty votes, and are convertible into five common shares.      CW1360087.4
        11       Item2.Managements Discussion and Analysis or Plan of Operation. FORWARD-LOOKING STATEMENTS This quarterly report contains forward-looking statements as that term is defined in Section 27A of the United States Securities Act of 1933 and section 21E of the United States Securities Exchange Act of 1934.  These statements relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled Risk Factors, that may cause our or our industrys actual results, levels of activity,
performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are stated in United States dollars and are prepared in conformity with generally accepted accounting principles in the United States of America for interim financial statements.  The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. As used in this quarterly report and unless otherwise indicated, the terms we, us and our refer to Biopack Environmental Solutions Inc. and our subsidiaries, unless otherwise indicated.  Unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to common shares refer to the common shares in our capital stock. Corporate History We were incorporated on August 28, 2000 in the state of Nevada under the name Quadric Acquisitions.  Following our incorporation we were not actively engaged in any business activities.  On April 25, 2001, we were acquired by Zkid Network Company and changed our name to ZKid Network Co.  As a result, we became engaged in the business of providing media content for children through the use of our proprietary software. On February 8, 2006, we announced that we would be unable to raise the necessary funds to continue with our then-existing business model and plan.  Accordingly, we decided to seek an active company to acquire. On May 8, 2006, we closed a share exchange agreement with Star Metro Group Limited, which became our wholly-owned subsidiary.  Under the terms of the share exchange agreement we exchanged 60,000,000 shares of our company for 100% of the issued and outstanding shares of Star Metro Group at a ratio of 1 share of our common stock for each 2,000 shares of Star Metro Group Limiteds stock.  As a result of the share exchange agreement, we became engaged in the development of a line of biodegradable, single use, food and beverage containers. On March 20, 2006, we changed our name from ZKid Network Co. to Eatware Corporation. On November 27, 2006, we changed our name from Eatware Corporation to Star Metro Corp..  We were required to effect this name change by the terms of an agreement we entered into on November 13, 2006, with Glory Team Industrial Limited and Eddie Chou.  We effected this name change by merging Star Metro Corp., our newly incorporated and wholly-owned subsidiary that was created for this purpose, into our company, with our company carrying on as the surviving corporation under the name Star Metro Corp. On February 26, 2007, we changed our name from Star Metro Corp. to Biopack Environmental Solutions Inc. This name change was effected by merging Biopack Environmental Solutions Inc., our newly incorporated and wholly-owned subsidiary that was created for this purpose, into our company, with our company carrying on as the surviving corporation under the name Biopack Environmental Solutions Inc.   CW1360087.4
        12       On March 27, 2007, we completed a share exchange with the shareholders of Roots Biopack Group Limited, a company formed under the laws of the British Virgin Islands.  Under the terms of the share exchange agreement we acquired all of the issued and outstanding common shares of Roots Biopack Group in exchange for the issuance by our company of 90,000,000 common shares to the former shareholders of Roots Biopack Group.  As of the closing date of the share exchange agreement, the former shareholders of Roots Biopack Group held approximately 62.13% of the issued and outstanding common shares of our company. Prior to our acquisition of the common shares of Roots Biopack Group, we had one wholly owned subsidiary, Starmetro Group Limited, which is incorporated in the British Virgin Islands.  Starmetro Group Limited, in its turn, had two wholly owned subsidiaries: E-ware Corporation Limited, a Hong Kong corporation, and Bioplanet Distribution Sdn Bhd, a Malaysian corporation. When we acquired Roots Biopack Group Limited, we also acquired its subsidiaries.  The following table shows our corporate structure following the acquisition of Roots Biopack Group Limited:  Since the completion of our share exchange with the former shareholders of Roots Biopack Group Limited, we have begun the process of integrating our existing business, being the development of a line of biodegradable, single use, food and beverage containers, with the Roots Biopack Group business, which consists of the development, manufacture, distribution and sale of biodegradable food container and industrial packaging products made from natural materials.  Because we are the successor business to Roots Biopack Group and because the operations and assets of Roots Biopack Group represents our entire business and operations from the date of completion of the share exchange, our management's discussion and analysis is based on Roots Biopack Group financial results for the relevant periods. For accounting purposes, Roots Biopack Group Limited is considered the acquirer in our transaction and is therefore treated as our predecessor entity as of March 27, 2007.  Therefore, beginning with our quarterly report on Form 10-QSB for the first quarter of 2007 (ended March 31, 2007), which was our first periodic report for the quarter in which the acquisition was consummated, we will file annual and quarterly reports based on the December 31 fiscal year-end of Roots Biopack Group Limited.  The financial statements included in these periodic reports will depict the operating results of Roots Biopack Group Limited, including the acquisition of our company, from March 27, 2007.   CW1360087.4
        13       Effective July 25, 2007, we filed a certificate of designation with the Secretary of State of Nevada, designating 1,000,000 Series B Preferred Shares.  Each Series B Preferred Share has the right to thirty (30) votes at any meeting of our shareholders and the right to convert, at any time at the holders option, into five (5) common shares in the capital stock of our company. General Overview The address of our principal executive office is 18/F Metroplaza Tower II, 223 Hing Fong Road, Kwai Chung, New Territories, Hong Kong.  Our telephone number is 852.3586.1383. Our Malaysia subsidiary, Bioplanet Distribution Sdn Bhd, maintains an office located at Suite E-09-07, Level 9, Block E, Plaza Mont' Kiara, No. 2, Jalan Kiara, Mont' Kiara, 50480 Kuala Lumpur, Wilayah Persekutuan, Malaysia.  Our telephone number at this office is 603.6203.9899. Our newly acquired subsidiary, Roots Biopack Limited, leases office space at Unit 2009, Hopewell Centre, 183 Queens Road East, Wan Chai, Hong Kong.  Management of this subsidiary moved into our principal executive office on May 21, 2007 and the office space at Hopewell Centre is currently vacant.  The lease for this office does not expire until November 14, 2008 and we are actively attempting to sublease the premises or assign the lease to a new tenant. Our Peoples Republic of China (PRC) subsidiary, Jiangmen Roots Biopack Limited, leases a 4vacant adjacent properties situated at No.3, Yangjiaokeng Industrial District, Tingyuan Village, Duruan Town, Jiangmen City, PRC.  This area is where we intend to locate our planned factory, named Roots Biopark. Our common stock is quoted on the OTC Bulletin Board under the symbol BPEV. Note Regarding Forward-Looking Statements This quarterly report on Form 10-QSB includes forward-looking statements.  Forward-looking statements are statements that relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section of this quarterly report entitled Risk Factors beginning at page  below, any of which may cause our or our industrys actual results, levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. We caution the reader that important factors in some cases have affected and, in the future, could materially affect our actual results and could cause our actual results in the future to differ materially from the results expressed in any estimates, projections or other forward-looking statements contained in this quarterly report on Form 10-QSB.  Except as may otherwise be required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform them to actual results. Our Business We develop, manufacture, distribute and market bio-degradable food containers and disposable industrial packaging.  Until mid-May, 2007, our products were manufactured by a factory located in Shunde City, China.  In mid-May, 2007 we terminated our relationship with this supplier due to a deterioration in quality and an unstable supply.  In July, 2007, we completed arrangements with two independent factories, located in Join-in and in Shenling, PRC, to continue to manufacture our products on an oral open-order basis and we intend to continue to rely on these two factories for our production needs until completion of the first phase of our Biopark facility in Jiangmen, PRC.  We anticipate that production from these facilities will begin shipping in early September, 2007.  The change in factories involved production flow and quality control issues and it has adversely affected our sales.  As a
result, we anticipate that sale this year will be below our budget.   CW1360087.4
        14       Prior to the date that we acquired our wholly-owned subsidiary Roots Biopack Group Limited, Roots Biopack Group Limited had entered into an agreement to purchase land in Jiangmen upon which it intended to build a large new factory facility designed to handle all of its production requirements.  We have not yet completed acquisition of this land nor have we commenced construction of any factory at that location and our management is currently considering whether it is in our companys best interest to proceed with this plan.  Also prior to the date of our acquisition of Roots Biopack Group Limited, Jiangmen Roots Biopack Limited, a PRC subsidiary of Roots Biopack Group Limited, entered into a lease for a vacant factory also located in Jiangmen City, PRC.  This lease is for a 15 year term.  On August 19, 2007, we entered into an agreement with Tayna Environmental Technology Co. Limited, an unrelated
third party, to set up phase one of our production facility in that leased factory.  Under this agreement with Tayna Environmental, we have agreed to develop and sell to Tayna Environmental the 20 production machines required for the operation of two production lines to be installed in the leased Jiangmen factory.  We have agreed to assist Tayna in setting up these production lines for the manufacture of our products, to train personnel and manage the facility and to assist in sales after commencement of operation.  We believe that, upon completion of these two production lines, this factory should be capable of producing approximately 320 million pieces a year.  At the date of this Form 10-QSB, we have completed the assembly of four production machines and are in the process of assembling an additional eight machines.  We are simultaneously putting into place the infrastructure required to begin production and currently anticipate that Tayna Environmental should be in a position to
begin production during the fourth calendar quarter of 2007. Once phase one of our production plan is completed, we intend to begin phase two and three.  These call for the development of two additional production lines (with 10 additional machines for each production line).  We are targeting an aggregate production capacity of approximately 480,000,000 pieces during 2008. Our sales and marketing team is located primarily in Hong Kong and is supported by a newly-established sales team in our Malaysia office.  Through our sales and marketing team and distributors, we supply our biodegradable food containers and industrial packaging products to multi-national corporations, supermarket chains and restaurants located across North America, Europe and Asia. Industry Overview Currently, the majority of disposable packaging products are made from plastic, paper or polystyrene, which are typically non-recyclable and non-biodegradable.  As a result, the only method to dispose of plastic, paper, or polystyrene disposable packaging products is to discard them in landfills.  Consequently, millions of tons of plastic, paper, or polystyrene disposable packaging products are discarded in landfills across the world each year.  In the last decade there has been increasing public concern over the harmful impact that plastic, paper, or polystyrene disposable packaging products have on the environment.  Because of this public concern (i) governments located across the world have begun to adopt regulations intended to restrict and in some cases even ban the use of plastic, paper, or polystyrene disposable packaging products and (ii) multi-national corporations have begun to seek an alternative
to plastic, paper, or polystyrene disposable packaging products that is less harmful to the environment.  As these trends continue, we believe that market for biodegradable food containers and industrial packaging products will face rapid growth in the future. Result of Operations for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006. During the six-month period ended June 30, 2007 we had a net operating loss of $377,399, as compared to $253,157 for the six-month period ended June 30, 2006.  The increase in operating loss was due primarily to the cost of marketing, branding and product development, as well as non-recurring professional fees.  Sales for the period were down marginally due to seasonal demand, the restructuring of our company and quality control and supply issues with our production facility in Shunde City. Net Sales and Cost of Sales Net sales for the six-month period ended June 30, 2007 were $1,593,122, compared to net sales of $3,311,181 for the six-month period ended June 30, 2006.  Sales were low due to retooling and changes at our production facility, as well as production and quality control issues at our Shunde City facility.  The changes at our production facility were completed shortly after the period end and, on May 17, 2007 we signed a letter of intent to secure additional production facilities.   CW1360087.4
        15       Cost of sales for the six-month period ended June 30, 2007 was $975,876, compared to $2,624,052 for the same period in 2006, which provided a gross margin of 38.74%, as compared to 20.75% during the same period of 2006.  The difference in the margin is primarily due to the fact that we have a different profit margin on our current source of revenue. Operating Expenses Operating expenses for the six-month period ended June 30, 2007 were $917,170, compared to $369,193 during the same period in 2006.  The increase in operating expenses was due primarily to marketing and other costs associated with the business combination.  Many of these costs are expected to be non-recurring. Other Income and Expenses We incurred interest expense for the six months ended June 30, 2007 of $53,968.  We incurred interest expense for the six-month period ended June 30, 2006 of $908.  The increase in interest expenditures of $53,060 for the six-month period ended June 30, 2007 was primarily due to an interest payable on a promissory note. Liquidity and Capital Resources Our principal cash requirements are for daily working capital, manufacturing and installation of machinery and the cost of infrastructure at our planned production facilities in our leased factory in Jiangmen City, PRC.  On June 30, 2007 we had cash of $61,626. Capital Resources For the six-month period ended June 30, 2007 we had a working capital deficiency of $1,541,387 compared to a working capital surplus of $2,164,868 during the six-month period ended June 30, 2006.  The decrease in working capital for the period was primarily due to payment of an earnest money deposit in the amount of $127,980.34 with respect to the pending acquisition of real estate in Jiangmen, PRC, as well as prepayments and receivables incurred in connection with the development of our leased factory in Jiangmen, PRC.On June 30, 2007, we had cash and cash equivalents of $61,626 as compared to $801,795 for the six-month period ended June 30, 2006. Cash Flow Used in Operating Activities For the six months ended June 30, 2007 our operating activities used net cash of $1,458,250.  For the six months ended June 30, 2006 our operating activities used net cash of $435,478.  The increase in cash used in operating activities is primarily due to the expansion of our operations. Cash Flow Used in Investing Activities For the six months ended June 30, 2007 investing activities used net cash of $755,670, compared to net cash generated of $39,952 during the six-month period ended June 30, 2006.  The increase in net cash used in investing activities was primarily due to an increase in prepayments. Cash Flow Provided by Financing Activities For the six months ended June 30, 2007 cash flow provided by financing activities provided cash of $755,670.  For the six months ended June 30, 2006 cash flow provided by financing activities provided cash of $39,952.  The increase in cash flow provided by financing activities of $715,718 for the six months ended June 30, 2007 was primarily due to advances from a third party, Begonia Participation Corp. On August 1, 2007, we entered into a Debt Settlement and Subscription Agreement with Begonia Participation Corp. to settle a Loan and Shareholders Agreement dated December 21, 2006.  Begonia agreed to accept, in full satisfaction of the $1,133,667.70 owed to them by our subsidiary, Roots Biopack Group Limited, under the Loan and Shareholders Agreement between Begonia and Roots Biopack Group, 1,000,000 Series A Preferred Shares in the capital stock of our company and 1,000,000 Series B Preferred Shares in the capital stock of our company.  Each Series A Preferred Share and each Series B Preferred Share has the right to thirty (30) votes at any meeting of our  CW1360087.4
        16      shareholders and the right to convert, at any time at the holders option, into five (5) common shares in the capital stock of our company. Capital Expenditures We incurred capital expenditures in vehicle and computer equipment. As of June 30, 2007, we had the following material commitments for capital expenditures: 3 Parcels of Land totalling 198.9 acres
        $2,709,861Machinery & Equipment
        83,000Ancillary equipment & Installation
        375,000Infrastructure construction
        180,000Office renovation
        25,000Production moulds
        400,000 Phase I of the construction Over the next twelve months, we expect to spend $18,000,000 on capital expenditures. Commitments and Contingencies We lease three offices.  We lease our Hong Kong office pursuant to a lease for a period of three years beginning June 2, 2006 and ending June 4, 2009, with monthly payments of $8,572 per month.  We lease our Malaysia office pursuant to a lease for a period of one year beginning December 15, 2006 and ending December 14, 2007 with monthly payments of $1,243 per month.  Our new subsidiary, Roots Biopack Group Limited, leases an office at Unit 2009, Hopewell Centre, 183 Queens Road East, Wan Chai, Hong Kong, for a monthly rent of $4,295.  This lease will expire November 14, 2008 and we are currently attempting to sublease or assign these premises as they are superfluous to our present needs.  Our PRC subsidiary, Jiangmen Roots Biopack Limited, leases 4 vacant properties at No.3, Yangjiaokeng Industrial District, Tingyuan Village, Duruan Town, Jiangmen City, PRC.  This leased property will serve as our
PRC office and factory.  The term of this lease began March 1, 2007 and expires Feb 29, 2022, with monthly rental payments progressively increasing from an initial monthly payment of $12,993. We lease office equipment and office renovations in Hong Kong.  The lease is for a period of three years beginning June 5, 2006 and ending June 4, 2009 with monthly payments of $2,731 per month. We have an agreement to pay for corporate management services for the period beginning September 1, 2006 and ending May 31, 2009. The management fee is in the amount of $12,438 per month. The following table shows a projection of future minimum payments under operating leases and corporate management service agreements as of December 31, 2006: 2007
        $
        447,4982008
        
        452,1262009
        
        278,636$
        1, 178,260 Going Concern The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern.  Our consolidated financial statements show that we have a working capital deficit of $1,541,387.  The future of our company is dependent upon our continuing to maintain and grow our operations and raising the capital that this growth will require through the issuance of equity securities, borrowings or a combination thereof.  The consolidated financial statements do not include any adjustments relating to recoverability and classification of  CW1360087.4
        17      recorded assets, or the amounts or classifications of liabilities that might be necessary in the event our company cannot continue in existence. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Significant Accounting Policies Use of Estimates In preparing consolidated financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Significant estimates include the valuation of accounts receivable, the estimation of useful lives of property, plant and equipment, and deferred income taxes.  Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Accounts Receivable Accounts receivable are stated at original amounts less an allowance made for doubtful receivables, if any, based on a review of all outstanding amounts at the end of the period.  Full allowances for doubtful receivables are made when the receivables are overdue for one year and an allowance is made when there is objective evidence that the Company will not be able to collect all amounts due according to original terms of receivables.  Bad debts are written against the allowance when identified.  The Company extends credit to customers on an unsecured basis in the normal course of business and believes that all accounts receivable in excess of the allowance for doubtful accounts are to be fully collectible.  The Company does not accrue interest on trade accounts receivable.  The normal credit terms range from 15 to 60 days.  The Company did not record an allowance for doubtful accounts at June 30, 2007 due to
no bad debt experience during the period. Property, Plant and Equipment Property, plant and equipment is stated at cost. Depreciation is provided principally by use of the straight-line method over the useful lives of the related assets, except for leasehold properties, which are depreciated over the terms of their related leases or their estimated useful lives, whichever is less. Expenditures for maintenance and repairs, which do not improve or extend the expected useful life of the assets, are expensed to operations while major repairs are capitalized. The estimated useful lives are as follows: YearsLeasehold improvements
        5Furniture and fixtures
        5Vehicles
        5Computer equipment
        5  The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets, and, if any, is recognized in the statement of operations. Impairment of Assets In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets", the Company evaluates its long-lived assets to determine whether later events and  CW1360087.4
        18      circumstances warrant revised estimates of useful lives or a reduction in carrying value due to impairment. If indicators of impairment exist and if the value of the assets is impaired, an impairment loss would be recognized. As of March 31, 2007, no impairment loss has been recognized. Income Taxes The Company accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Foreign Currency Transactions The Companys functional currency is Hong Kong Dollars (HKD) and Malaysia Ringatt (MYR)and its reporting currency is U.S. dollars. The Companys consolidated balance sheet accounts are translated into U.S. dollars at the period end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the periods in which these items arise. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred. Fair Value of Financial Instruments SFAS No. 107, Disclosures about Fair Values of Financial Instruments, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement. For certain financial instruments, including cash, accounts and other receivables, accounts payable, accruals and other payables, it was assumed that the carrying amounts approximate fair value because of the near term maturities of such obligations. The carrying amounts of long-term loans approximate fair value as the interest on these loans is minimal. It is managements opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments. The Company is exposed to certain foreign currency risk from export sales and import purchase transactions and recognized accounts receivable and payable as they will affect the future operating results of the Company.  The Company did not have any hedging activities during the reporting period. Earnings Per Share Basic earnings per share is computed by dividing the earnings for the year by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including stock options and warrants, in the weighted average number of common shares outstanding for a period, if dilutive. Accumulated Other Comprehensive Income The Company has adopted SFAS 130, Reporting Comprehensive Income, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances.  Accumulated other comprehensive income represents the change in equity of the Company during the periods presented from foreign currency translation adjustments. Stock-Based Compensation   CW1360087.4
        19       In March 2004, the FASB issued a proposed statement, Share-Based Payment, which addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for equity instruments of the enterprise or liabilities that are based on the grant-date fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. The proposed statement would eliminate the ability to account for share-based compensation transactions using Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and generally would require instead that such transactions be accounted for using a fair-value-based method. In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which is a revision of SFAS No. 123. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No.
123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their grant-date fair values. Pro forma disclosure is no longer an alternative. As permitted by SFAS No. 123, for 2005, the Company accounted for share-based payments to employees using APB Opinion No. 25's intrinsic value method and, as such, generally recognized no compensation cost for employee stock options. Effective January 1, 2006, the Company have adopted SFAS No. 123(R)'s fair value method of accounting for share based payments. Accordingly, the adoption of SFAS No. 123(R)'s fair value method may have a significant impact on the Company's results of operations as are required to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. SFAS No. 123(R) permits public companies to adopt its requirements using either the "modified prospective" method or the "modified retrospective" method. The Company adopted SFAS No. 123(R) using the modified prospective method. In April 2005, the SEC delayed the effective date of SFAS No. 123(R), which is now effective for public companies for annual, rather than interim periods that begin after June 15, 2005. The impact of the adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. Revenue Recognition Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors such as when there has been evidence of a sales arrangement, the performance has occurred, or service have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Concentration of Credit Risk Concentration of credit risk is limited to accounts receivable and is subject to the financial conditions of major customers.  The Company does not require collateral or other security to support accounts receivable.  The Company conducts periodic reviews of its clients financial condition and customers payment practices to minimize collection risk on accounts receivable. RISK FACTORS Our common shares are considered speculative during the development of our new business operations.  Prospective investors should consider carefully the risk factors set out below. RISKS RELATED TO OUR BUSINESS Going Concern The accompanying consolidated financial statements have been prepared assuming that the we will continue as a going concern. These consolidated financial statements show that we have a working capital deficit of $1,541,387 and that we have sustained losses totalling $742,026 since inception.  The future of our Company is dependent upon its continuing successful operations, or raise the capital it will require through the issuance of equity securities, borrowings or a combination thereof.  The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded assets, or the amounts or classifications of liabilities that might be necessary in the event the Company cannot continue in existence.   CW1360087.4
        20       We operate in a competitive industry and our failure to compete effectively may adversely affect our ability to generate revenue. The disposable packaging industry is competitive and subject to frequent product introductions with improved price and or performance characteristics.  Many companies, including those who manufacture their disposable packaging products out of plastic, paper or polystyrene, have greater financial, research and development, marketing and sales resources, offer a broader product line, have better brand recognition and have a larger customer base than we do.  Increased competition in the disposable packaging industry could result in significant price competition, reduced profit margins or loss of market share, any one of which could have a material adverse effect on our ability to generate revenues and successfully operate our business. Established manufacturers in the disposable packaging industry could reduce their prices or engage in advertising or marketing campaigns designed to protect their respective market shares, improve their ability to recycle their existing products or they could develop new environmentally friendly products, which could render our products obsolete and could negatively impact our ability to compete. Our competitors may reduce their prices or engage in advertising or marketing campaigns designed to protect their respective market shares and impede the market acceptance of our disposable packaging products.  We expect that many of our competitors may actively seek competitive alternatives to our disposable packaging products.  The development of competitive disposable packaging products could render our disposable packaging products obsolete and could impair our ability to compete, which would have an adverse effect on our business, financial condition and results of operations. We may suffer significant losses resulting from general product liability, which may harm our financial condition and result of operations. As a manufacturer of disposable packaging products we are at risk for potentially significant product liability and associated losses.  We cannot predict or protect against all potential losses or liabilities that may arise relating to our disposable food container and industrial packaging products.  We maintain insurance against many, but not all, potential losses and liabilities, in accordance with customary industry practice and in amounts we believe to be necessary.  If any losses or liabilities are not covered by insurance, or if the insurance is insufficient, we would be required to satisfy these losses and liabilities and our financial condition and results of operations may be adversely affected. We rely on a number of different suppliers to supply us with the materials that we require to manufacture our disposable packaging products.  We could be adversely affected by an increase in our suppliers prices or a significant decline in our suppliers financial condition.  As a result, our business may fail and investors may lose their entire investment. We rely on a number of different suppliers to supply our company with the materials that we require to manufacture our disposable packaging products.  We could be adversely affected by an increase in any one of our suppliers prices or a significant decline in any one of our suppliers financial condition.  If the relationship with anyone one of our suppliers is terminated and we are unsuccessful in establishing a relationship with an alternative supplier who offers similar products at similar prices, our results of operations could be adversely affected.  As a result, our business may fail and investors may lose their entire investment. We rely on a number of distributors to distribute our disposable packaging products to customers.  We could be adversely affected by an increase in our suppliers prices or a significant decline in our suppliers financial condition.  As a result, our business may fail and investors may lose their entire investment. We rely on a number of distributors to distribute our disposable packaging products to our customers.We could be adversely affected by an increase in our distributors prices of distribution services or a significant decline in our distributors financial condition.  If the relationships with any one of our distributors is terminated and we are not successful in establishing a relationship with an alternative distributor who offers similar services at similar prices, our results of operations could be adversely affected, our business may fail and investors may lose their entire investment.   CW1360087.4
        21       Counterfeiting or confusingly similar products could harm the image and integrity of, or decrease customer support for, our brands and decrease our sales.  The success of our products depends upon the positive image that consumers have of them. Counterfeiting or the creation of products that look like ours, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our products, could affect the demand for our products. To the extent that third parties sell products that are either counterfeit versions of our products or products that look like our products, consumers of our products could confuse our products with products that they consider inferior. This could cause them to refrain from purchasing our products in the future and in turn could impair our brand equity and adversely affect our sales and operations. We rely on two independent OEM manufacturers to manufacture our disposable packaging products. Since we do not have our own factory, we could be adversely affected if either manufacturer increases their prices or ceases to manufacture our products. As a result, our business may fail and investors may lose their entire investment. We currently do not have our own production facilities and rely on two independent OEM manufacturers to manufacture our disposable packaging products.  We could be adversely affected by an increase in price to manufacture our products.  If the relationship with anyone of our manufacturers is terminated and we are unsuccessful in establishing a relationship with an alternative manufacturer who offers similar products at similar prices, our results of operations could be adversely affected.  As a result, our business may fail and investors may lose their entire investment. We rely on certain strategic raw materials for our operations.  If the raw materials we use to manufacture our disposable packaging products increase substantially in price or for whatever reason becomes unavailable to us our business could fail and investors could lose their entire investment. Although we believe that there are sufficient quantities of the raw materials we use to manufacture our disposable packaging products, the continuous existence and availability and price of these raw materials may be affected by natural disasters, domestic and world markets, political conditions, changes in government regulation and war or other outbreak of hostilities.  If the raw materials we use to manufacture our disposable packaging products increase substantially in price or for any reason become unavailable to us our business could fail and investors could lose their entire investment. Substantially all of our assets, all of our directors and all of our executive officers reside outside the United States.  As a result it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or executive officers. Substantially all of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States.  In addition, all of our directors and executive officers are nationals and residents of countries other than the United States, and all or a substantial portion of such persons assets are located outside the United States.  As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.  Consequently, investors may be effectively prevented from pursuing remedies under U.S. federal securities laws against us or any of our directors or executive officers. Our ability to hire and retain qualified personnel will be an important factor in the success of our business and a failure to hire and retain key personnel may result in our inability to manage and implement our business plan. Our ability to hire and retain qualified personnel will be an important factor in the success of our business.  The competition for qualified personnel in the disposable packaging industry in which we operate is high.  In addition, in order to manage growth effectively, we must implement management systems and continue to recruit and train new employees.  We may not be able to attract and retain the necessary qualified personnel.  If we are unable to retain or to hire qualified personnel as required, we may not be able to adequately manage and implement our business plan. Our international operations subject us to a number of risks, including unfavorable political, regulatory, labor and tax conditions in foreign countries.  We may not be able to develop and implement policies and strategies that will  CW1360087.4
        22      be effective in each location where we do business and as a result our business could fail and investors could lose their entire investment. Our international operations subject us to the legal, political, social and regulatory requirements and economic conditions of many jurisdictions. Risks inherent to international operations include the following: -
        difficulty in enforcing agreements in foreign legal systems;-
        foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade and investment, including currency exchange controls;-
        fluctuations in exchange rates may affect product demand and may adversely affect our profitability in United States dollars to the extent the price of our products and cost of raw materials is denominated in a foreign currency;-
        Inability to obtain, maintain or enforce intellectual property rights;-
        Changes in general economic and political conditions in the countries in which we operate;-
        unexpected adverse changes in foreign laws or regulatory requirements, including those with respect to export duties and quotas;-
        difficulty with staffing and managing widespread operations;-
        trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries; and,-
        difficulty of and costs relating to compliance with the different commercial and legal requirements of the overseas markets in which we offer and sell our products. Our international operations require us to respond to rapid changes in market conditions in these countries.  The success of our international operations depends, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions.  We may not be able to develop and implement policies and strategies that will be effective in each location where we do business and as a result our business could fail and investors could lose their entire investment. In addition, we source all of our manufacturing in China.  China is experiencing very rapid economic growth which could have a negative impact on our business activities there.  These include worsening inflation, fluctuations in the yuan, and challenges to the nation's electric power supply capacity.  In addition, developments in China's financial system and current legislative trends could pose future business risks, including changes to its laws that might prohibit or restrict foreign ownership. The limitation of our available manufacturing capacity due to significant disruption in our manufacturing operation could have a material adverse effect on sales revenue and results of operations and financial condition. We manufacture our disposable packaging products using complex processes that require technologically advanced equipment and continuous modification to improve yields and performance.  From time to time, we have experienced minor disruptions in our manufacturing process as a result of power outages or equipment failures.  If production at our manufacturing plant is disrupted for any number of reasons, manufacturing yields may be adversely affected and we may be unable to meet our customers requirements.  Consequently, our customers may purchase disposable food packaging products from our competitors.  This could result in a significant loss of revenues and damage to our customer relationships, which could materially adversely effect our business, results of operations or financial condition.   CW1360087.4
        23       Our disposable packaging products may be perceived poorly by environmental groups, customers and government regulators, which could have an adverse effect on our business, causing us to cease operations. Our success depends substantially on our ability to manufacture disposable packaging products that are less harmful to the environment than disposable packaging products, which are made from plastic, paper or polystyrene. Although we believe that our disposable packaging products are less harmful to the environment than other disposable packaging products, which are made from paper, plastic and polystyrene, our disposable packaging products may also possess characteristics that environmental groups could perceive as negative for the environment. When biodegradable waste is disposed of in landfills, it breaks down under uncontrolled anaerobic conditions.  This produces landfill gas which, if not harnessed, escapes into the atmosphere.  Landfill gas contains methane, a more harmful greenhouse gas than carbon dioxide.  The European Union Landfill Directive puts key requirements on member states for the
management of biodegradable waste in order to stop global warming.  Whether, on balance, our disposable packaging products are better for the environment than other disposable packaging products, which are made from either plastic, paper or polystyrene is a somewhat subjective judgment.  Environmental groups, customers, and governmental regulators may not agree that our disposable packaging products have an advantage over other disposable packaging products, which are made from plastic, paper or polystyrene.  If our disposable packaging products are perceived as being harmful to the environment, our revenues will likely suffer and as a result we could go out of business. We have a stable customer base; however, loss of, or material financial weakness of, certain of our largest customers could adversely affect our financial condition and results of operations until such business is replaced and no assurances can be made that we would be able to regain or replace any lost customers.  This could cause us to go out of business and investors could lose their entire investment. Although we have a stable customer base, we relied on our largest five customers for approximately 98 % of our sales in 2006.  The loss of these customers would adversely affect revenues and results of operations, and the loss of any other significant customers could adversely affect revenues and results of operations unless and until the lost business is replaced.  We believe that it is unlikely that we could replace these customers.  This could cause us to go out of business and investors could lose their entire investment. Our business is subject to complex health, safety and environmental laws and industry regulations, which require and will continue to require significant expenditures to remain in compliance with such laws and regulations currently and in the future.  Costs of such compliance will likely reduce our probability.  Our business is subject to complex health, safety and environmental laws and industry regulations, which require and will continue to require significant expenditures to remain in compliance with such laws and regulations currently and in the future.  Unanticipated government enforcement action, or changes in health, safety and environmental laws and industrial regulations could result in higher costs which may negatively affect our profitability.  We may lose our competitiveness if we are not able to protect our proprietary technology and intellectual property rights against infringement, and any related litigation may be time-consuming and costly.If we cannot compete successfully we may go out of business. Our success and ability to compete depends to a significant degree on our proprietary technology.  If any of our competitors copy or otherwise gain access to our proprietary technology or develop similar disposable packaging products independently, we may not be able to compete as effectively.  The measures we have implemented to protect our proprietary technology and other intellectual property rights are currently based upon a combination of provisional patent applications, patents, trademarks and trade secrets.  These measures, however, may not be adequate to prevent the unauthorized use of our proprietary technology and our other intellectual property rights. Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights.  We may need to bring legal claims to enforce or protect such intellectual property rights.  Any litigation, whether successful or
unsuccessful, may result in substantial costs and a diversion of our company's resources.  In addition, notwithstanding our rights to our intellectual property, other persons may bring claims against us alleging that we have infringed on their intellectual property rights or claims that our intellectual property rights are not valid.  Any claims against us, with or without merit, could be time consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our business or require us to make changes to our disposable food container and industrial packaging products.   CW1360087.4
        24       Because our executive officers, directors control a high percentage of our common stock, such insiders may have the ability to influence matters affecting our shareholders. Our executive officers and directors, in the aggregate, beneficially own 78.30% of the issued and outstanding shares of our common stock.As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our executive officers, directors and principal shareholders control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated.  Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock. RISKS RELATED TO OUR COMMON STOCK A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations. A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because a portion of our continued operations will be financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations.  Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations.  If our stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations.  If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations. The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors.  Any failure to meet these expectations, even if minor, may have a material adverse effect on the market price of our common stock. If we issue additional shares in the future, it will result in the dilution of our existing shareholders. Our certificate of incorporation, as amended, authorizes the issuance of up to 50,000,000 shares of common stock with a par value of $0.0001 and 10,000,000 shares of preferred stock with a par value of $0.001.  Our board of directors may choose to issue some or all of such shares to provide additional financing in the future.  The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock.  If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders.  Further, such issuance may result in a change of control of our company. Trading of our stock may be restricted by the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability to buy and sell our stock. The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.  Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors".  The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the
Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation.  In addition, the penny stock rules require that prior to a transaction in a penny  CW1360087.4
        25      stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.  These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.  Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.  We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock. NASD sales practice requirements may also limit a stockholder's ability to buy and sell our stock. In addition to the "penny stock" rules described above, the National Association of Securities Dealers (NASD) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.  Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.  Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers.  The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and
have an adverse effect on the market for our shares. Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations. Our common stock currently trades on a limited basis on the OTC Bulletin Board.  Trading of our stock through the OTC Bulletin Board is frequently thin and highly volatile.  There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock.  The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us.  In addition, the stock market is subject to extreme price and volume fluctuations.  This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to
their operating performance and could have the same effect on our common stock. Item3.Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report, being June 30, 2007, we have carried out an evaluation of the effectiveness of the design and operation of our companys disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of our companys management at June 30, 2007, including our companys principal executive officer and our former and existing principal financial officers.  Based upon that evaluation, our companys principal executive officer and our former and existing principal financial officers concluded that our companys disclosure controls and procedures are effective as at the end of the period covered by this report.  There have been no changes in our companys internal controls or in other factors, which could affect
internal control subsequent to the date we carried out our evaluation. Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commissions rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Chief Executive Officer and our Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. PART II  -  OTHER INFORMATION Item1.Legal Proceedings. Other than as disclosed below, we know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation.  There are no proceedings in which any of  CW1360087.4
        26      our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us. By letter dated April 12, 2007 an attorney claiming to represent Good Value Galaxy Limited, a British Virgin Islands corporation that is a significant shareholder of our company, advised us that all of the issued shares of Good Value Galaxy Limited had been transferred.  This attorney advised that the shares of Good Value Galaxy Limited, which had previously been beneficially owned by Gerald Lau, our President and Chairman of our board of directors, had been transferred to Oung Cheng Hai effective April 11, 2007.  In addition, this attorney advised that Gerald Lau, who had previously been the sole director of Good Value Galaxy Limited, had resigned as a director of that company and Mr. Albert Oung had been appointed as the sole director of Good Value Galaxy Limited. In a second letter, also dated April 12, 2007, this same attorney advised that he represented both Good Value Galaxy Limited and Joyful Services Limited and that these two companies owned in excess of 10% of our companys issued and outstanding common shares.  This attorney, allegedly on behalf of Good Value Galaxy Limited and Joyful Services Limited, demanded that our company convene a special meeting of our shareholders to consider and pass resolutions to remove Gerald Lau (our President and a director) and Edwin Chan (a director of our company), appointing Albert Oung and Patrick Oung to serve as directors from that date forward. Upon our receipt of this correspondence, our attorneys asked Gerald Lau for confirmation of the alleged transfer of shares of Good Value Galaxy Limited and they asked the attorney making the allegations to provide us with credible evidence to support his allegations.  Mr. Laus attorneys informed us that no such transfer had taken place and that Mr. Lau continued to be the sole shareholder of both Good Value Galaxy Limited and Joyful Services Limited.  The attorney making the allegation that the shares of Good Value Galaxy Limited were transferred to Oung Cheng Hai has not yet provided us with any credible evidence that this alleged transfer took place.  In light of the absence of credible evidence of a transfer and the assertion from Gerald Lau, through his attorneys, that there has been no such transfer, we do not currently intend to comply with the requests of April 12, 2007. On May 8, 2007, we received a letter from a different law firm asserting that it represented Good Value Galaxy Limited and Joyful Services Limited and enclosing a document alleged to be the written consent of Good Value Galaxy Limited and Joyful Services Limited.  Albert Oung signed this alleged written consent on behalf of each of Good Value Galaxy Limited and Joyful Services Limited.  The alleged written consent purports to appoint Albert Oung and Patrick Oung to our board of directors effective immediately and to amend and restate our Bylaws.  Our attorneys replied to this letter of May 8, 2007, stating that we cannot accept the claim that ownership of the shares of Good Value Galaxy Limited and Joyful Services Limited has been transferred absent receipt of a persuasive explanation of the circumstances of the transfer and credible evidence showing how and why the alleged transfer took place.  We have
not yet received any such explanation or credible evidence.  Until we do, we cannot accept the alleged written consent as the act of Good Value Galaxy Limited and Joyful Services Limited. On May 31, 2007, our President and Chairman of our board of directors, Gerald Lau, filed a statement of claim in the High Court of the Hong Kong Special Administrative Region  Court of First Instance against Albert Oung, Oung Cheng Hai, Good Value Galaxy Limited and Joyful Services Limited regarding ownership of approximately 54.06% shares of our common stock. In his statement of claim, Mr. Lau alleges that in or about January 2007, upon him learning of a severe medical condition that he developed, he agreed to execute a declaration of trust in favour of Mr. Oung Cheng Hai which was to take effect upon the completion of a number of conditions.  Mr. Lau alleges that he signed a declaration of trust, an instrument of transfer in respect of the one (1) issued share in Good Value Galaxy Limited, a notice of resignation of Good Value Galaxy Limited, a written resolution of the sole director of Good Value Galaxy Limited approving the transfer of the share, the resignation of the sole director and the appointment of Mr. Oung Cheng Hai.  Mr. Lau further alleges that all the executed documents were to remain undated and were not to take effect until the following conditions were met: 
        the declaration of trust was to give effect to Mr. Laus intentions that the shares in Good Value Galaxy Limited and any funds and benefits derived therefrom were to be utilized for charitable purposes; 
        the declaration of trust should not take effect or become operative until 12 to 18 months after the completion of the share exchange with the shareholders of Roots Biopack Group Limited and our company;   CW1360087.4
        27       
        the declaration of trust should not take effect or become operative until after the approval and or clearance from the United State Securities and Exchange Commission is obtained for the transfer of the share in Good Value Galaxy Limited and for the resignation of Mr. Lau from our company; and 
        the declaration of trust was subject to Mr. Laus agreement and consent as to the date on which the documents shall take effect or become operative. Mr. Lau further alleges that while the documents were held in escrow by Mr. Oung Cheng Hai and Mr. Albert Oung, the documents were dated and materially altered in breach of the agreement and the conditions referred to above without the agreement, knowledge or consent of Mr. Lau.  In particular, Mr. Lau alleges that the declaration of trust was back-dated to the 17th of September 2003 and the instrument of transfer, notice of resignation and corporate resolution were dated the 11th of April 2007.  Mr. Lau seeks redress from the court to declare such documents as ineffective and/or void and/or of no effect. On July 13, 2007, Foshan City Shunde District Ka Fook Recycle Products Ltd. with its legal representative Mr. Patrick Oung instituted civil proceedings against our wholly owned subsidiary Jiangmen Roots Biopack Limited.  Foshan City Shunde District Ka Fook Recycle Products Ltd. and its legal representative Mr. Patrick Oung allege that we and our subsidiary authorized them to handle and establish early stage inspections, assessments, negotiations and all matters which were in the set-up process and to provide consultation services for setting up the factory.  Foshan City Shunde District Ka Fook Recycle Products Ltd. and its legal representative Mr. Patrick Oung further allege that during the is period our subsidiary had transferred a total of RMB 5,110,000 to Foshan City Shunde District Ka Fook Recycle Products Ltd. but because of of conflicts arignin gin the course of the set-up processes between directors
of our subsidiary, our subsidiary had not checked or reconciled the transactions with Foshan City Shunde District Ka Fook Recycle Products Ltd.  Foshan City Shunde District Ka Fook Recycle Products Ltd. and its legal representative Mr. Patrick Oung have asked the court to confirm that RMB 5,110,000 has been paid to Foshan City Shunde District Ka Fook Recycle Products Ltd. and to order our subsidiary to check and reconcile these transactions. On May 31, 2007, Foshan City Shunde District Ka Fook Recycle Products Ltd. with its legal representative Mr. Patrick Oung instituted civil proceedings against our wholly owned subsidiary Jiangmen Roots Biopack Limited.  Foshan City Shunde District Ka Fook Recycle Products Ltd. and its legal representative Mr. Patrick Oung allege that in February 2007 they signed a rental agreement with our wholly owned subsidiary for the sublease of approximately 5,000 m2in a factory located in Yangjiaokeng Industrial District, Tingyuan Village, Duran Town at a rate of 50,000 yans per month. Foshan City Shunde District Ka Fook Recycle Products Ltd. and its legal representative Mr. Patrick Oung further allege that they had moved a number of machines inside the factory and established production of machines for environmentally friendly products.  They further allege that on May 4, 2007 a dispute arose amongst the directors of our companyand that our subsidiary prohibited them from entering the factory, seized their assets and deliberately used and damaged these properties.  Foshan City Shunde District Ka Fook Recycle Products Ltd. and its legal representative Mr. Patrick Oung have asked the court to order our subsidiary to return all machinery, production facilities, materials, products, tools, business data and information and any related property belonging to Foshan City Shunde District Ka Fook Recycle Products Ltd. On June 4, 2007, pending the hearing of the case, the court ordered that the properties in dispute and RMB 2,800,000 be seized. Also on June 4, 2007, the court ordered that all materials, including the business information such as accounting records, information registered under the name of Foshan City Green Machiney Factory and placed  at the factory area of our wholly owned subsidiary plus our subsidiarys production equipments, products and the Minutes of Directors Meeting made on 4th and 5th May, 2007, Important Special Notice made on 5th May, 2007, Notice made on 11th May, 2007, and the Rental  Agreement executed by our subsidiary and Foshan City Shunde District Ka Fook Recycle Products Ltd. in February, 2007, shall be seized, detained, photographed, video-taped, copied, investigated, and listed, in order to preserve the evidence. On May 10, 2007, our wholly owned subsidiary, Jiangmen Roots Biopack Limited, and Gerald Lau as our subsidiarys legal representative filed a report of crime with the Public Security Bureau of Jiangmen City.  In the report of crime we alleged that Patrick Oung, a former director of our subsidiary, was given the authority to handle  CW1360087.4
        28      the early stages of the establishment of our factory in Jiangmen due to a serious illness to our president, Gerald Lau.  We further alleged that in April 2007 we discovered that Patrick Oung had paid a total of RMB 1,000,000 for a factory lease guarantee through our subsidiarys bank account by affixing our subsidiarys company seal without proper authorization from its board of directors or legal representative, where the actual factory lease guarantee required was only RMB 309,000.  Moreover, we discovered that a total of RMB 610,000 was transferred to Patrick Oungs personal account on March 6, 7, and 8, 2007.  For these reasons, we decided to file a criminal complaint and seek assistance from the Public Security Bureau of Jiangmen City. Item2.Unregistered Sales of Equity Securities and Use of Proceeds. On March 27, 2007, in connection with the closing of a share exchange agreement, we issued 90,000,000 shares of our common stock to the former shareholders of Roots Biopack Group.  We issued the common shares in an offshore transaction in reliance upon Regulation S and/or Section 4(2) of the Securities Act of 1933 to non-U.S. Persons (as that term is defined in Regulation S under the Securities Act of 1933). On March 27, 2007, in connection with the closing of a share exchange agreement, we issued 987,733 and 305,492 of our common stock to Ricky Chiu and Eddie Chou, two non U.S. persons who are also directors and officers of our company, in conversion of debt owed by us to them.  We issued the common shares in an offshore transaction in reliance upon Regulation S and/or Section 4(2) of the Securities Act of 1933 to non-U.S.  Persons (as that term is defined in Regulation S under the Securities Act of 1933). On August 17, 2007 the Company repaid the principal and accrued interest on a promissory note in the amount of $1,133,668 through the issuance of 1,000,000 shares of Series A preferred stock and 1,000,000 shares of newly authorized Series B preferred stock pursuant to a Debt Settlement and Subscription Agreement dated August 1, 2007.  Each of these preferred shares have thirty votes, and are convertible into five common shares. We issued the Series A and Series B Preferred Shares to a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933. Item3.Defaults Upon Senior Securities. None. Item4.Submission of Matters to a Vote of Security Holders. None. Item5.Other Information. By letter dated April 12, 2007 an attorney claiming to represent Good Value Galaxy Limited, a British Virgin Islands corporation that is a significant shareholder of our company, advised us that all of the issued shares of Good Value Galaxy Limited had been transferred.  This attorney advised that the shares of Good Value Galaxy Limited, which had previously been beneficially owned by Gerald Lau, our President and Chairman of our board of directors, had been transferred to Oung Cheng Hai effective April 11, 2007.  In addition, this attorney advised that Gerald Lau, who had previously been the sole director of Good Value Galaxy Limited, had resigned as a director of that company and Mr. Albert Oung had been appointed as the sole director of Good Value Galaxy Limited. In a second letter, also dated April 12, 2007, this same attorney advised that he represented both Good Value Galaxy Limited and Joyful Services Limited and that these two companies owned in excess of 10% of our companys issued and outstanding common shares.  This attorney, allegedly on behalf of Good Value Galaxy Limited and Joyful Services Limited, demanded that our company convene a special meeting of our shareholders to consider and pass resolutions to remove Gerald Lau (our President and a director) and Edwin Chan (a director of our company), appointing Albert Oung and Patrick Oung to serve as directors from that date forward. Upon our receipt of this correspondence, our attorneys asked Gerald Lau for confirmation of the alleged transfer of shares of Good Value Galaxy Limited and they asked the attorney making the allegations to provide us with credible evidence to support his allegations.  Mr. Laus attorneys informed us that no such transfer had taken place and that Mr. Lau continued to be the sole shareholder of both Good Value Galaxy Limited and Joyful Services Limited.  The  CW1360087.4
        29      attorney making the allegation that the shares of Good Value Galaxy Limited were transferred to Oung Cheng Hai has not yet provided us with any credible evidence that this alleged transfer took place.  In light of the absence of credible evidence of a transfer and the assertion from Gerald Lau, through his attorneys, that there has been no such transfer, we do not currently intend to comply with the requests of April 12, 2007. On May 8, 2007, we received a letter from a different law firm asserting that it represented Good Value Galaxy Limited and Joyful Services Limited and enclosing a document alleged to be the written consent of Good Value Galaxy Limited and Joyful Services Limited.  Albert Oung signed this alleged written consent on behalf of each of Good Value Galaxy Limited and Joyful Services Limited.  The alleged written consent purports to appoint Albert Oung and Patrick Oung to our board of directors effective immediately and to amend and restate our Bylaws.  Our attorneys replied to this letter of May 8, 2007, stating that we cannot accept the claim that ownership of the shares of Good Value Galaxy Limited and Joyful Services Limited has been transferred absent receipt of a persuasive explanation of the circumstances of the transfer and credible evidence showing how and why the alleged transfer took place.  We have
not yet received any such explanation or credible evidence.  Until we do, we cannot accept the alleged written consent as the act of Good Value Galaxy Limited and Joyful Services Limited. On August 1, 2007, we entered into a Debt Settlement and Subscription Agreement with Begonia Participation Corp., to settle a Loan and Shareholders Agreement dated as of December 21, 2006.  Begonia Participation Corp. has agreed to accept, in full satisfaction of the $1,133,667.70 currently outstanding under the Loan and Shareholders Agreement, 1,000,000 Series A Preferred Shares in the capital stock of our company and 1,000,000 Series B Preferred Shares in the capital stock of our company.  Each Series A Preferred Share and Series B Preferred Share has the right to thirty (30) votes at any shareholder meeting and the right to convert, at any time at the holders option, into five (5) common shares in the capital stock of our company. On July 24, 2007, Mr. Eddie Chou resigned as our Chief Financial Officer.  Concurrently, with Mr. Chous resignation, Mr. Edwin Chan was appointed as our Chief Financial Officer.  Mr. Chou is continuing to serve as our Chief Technical Officer, Secretary, Treasurer and director. On May 18, 2007, we entered into a letter of intent with Svena Floor Factory.  Under the terms of the letter of intent, Svena Floor Factory will set up a production facility to handle our increased production requirements.  Svena Floor Factory has agreed to pay us approximately $3,000,000 for the production rights.  In return, we will handle all customer sales for Svena Floor Factory and purchase for resale all units produced by Svena Floor Factory. On July 13, 2007, we received final approval from the United States Patent and Trademark Office for the exclusive use of the Roots Biopack branding and logo in the United States. Item6.Exhibits. Exhibits required by Item 601 of Regulation S-B ExhibitNumber
        Description(10)
        Material Contracts10.1*
        Sales and Purchase of Machinery, Technical Assistance and Factory Management Agreement dated August 19, 2007 between our company and Tayna Environmental Technology Co. Limited.(31)
        Section 302 Certifications31.1*
        Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(32)
        Section 906 Certifications32.1*
        Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
        Filed herewith.   CW1360087.4
        30       SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BIOOPACK ENVIRONMENTAL SOLUTIONS INC. By: Gerald Lau President, Principal Executive Officer and Director (Principal Executive Officer) Date: Aug  _____, 2007 By: Eddie Chou Secretary, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer) Date: Aug  _____, 2007   CW1360087.4
        31